boycott ın uNFAIR COMPETITION LAW

INTRODUCTION

In Turkish law, the concept of unfair competition is generally regulated in Article 57 of the Turkish Code of Obligations ("TCO") No. 6098. According to this, while the provisions of Article 57 of the TCO will apply to cases of unfair competition in civil matters, in commercial matters, unfair competition situations will be subject to the provisions of the Turkish Commercial Code ("TCC") No. 6102, as indicated by the reference in the second paragraph of the article. Although this is the rule, as explained in detail below, it is accepted in legal doctrine that the unfair competition provisions in the TCC can be applied not only to commercial matters but also to cases of unfair competition in civil matters, rendering Article 57 of the TCO ineffective.

The elements of unfair competition are regulated in Article 54/2 of the TCC, and the situations constituting unfair competition are listed in Article 55 of the TCC. The provisions in Article 55 are not exhaustive, meaning that in cases where unfair competition arises, the existence of the elements listed in Article 54 will not be required, and it will be accepted that an unfair competition situation exists.

One of the forms of unfair competition, "boycott," is not listed in Article 55 of the TCC, but due to its nature, it can be included within the unfair competition situations described in Articles 55/1-a or 55/1-b. In this regard, if the boycotted business or its products are defamed, Article 55/1-a of the TCC applies; if the boycotting party makes false and misleading statements to promote itself or others in the competition, Article 55/1-b of the TCC will apply.

In this article, we will first address the definition, purpose, and elements of unfair competition, and then examine the elements of a boycott in terms of unfair competition.

CONCEPT OF UNFAIR COMPETITION

The term "competition" generally refers to a conflict between individuals or entities aiming for the same goal; rivalry or contest. Competition can be defined more broadly as the efforts of businesses, companies, or individuals to expand their operations and increase their profits, thereby narrowing the scope of their competitors and surpassing them. When competition operates in violation of fairness and justice rules, it becomes unfair competition.

In Turkish law, the definition of unfair competition is provided in Article 54/2 of the Turkish Commercial Code No. 6102. According to this article, unfair competition is defined as "deceptive or otherwise unfair conduct in commercial practices that affects relations between competitors, suppliers, and customers." As can be understood from this definition, unfair competition is a specific form of the tort defined in the Turkish Code of Obligations No. 6098.

POSITIVE LAW RULES RELATED TO UNFAIR COMPETITION

The main legal norms regulating unfair competition are found between Articles 54 and 63 of the Turkish Commercial Code No. 6102. Since these provisions in the TCC form the basis of this article, they will be examined after the other legal regulations are discussed.

UNFAIR COMPETITION IN THE TURKISH CODE OF OBLIGATIONS

The unfair competition institution is generally regulated in Article 57 of the Turkish Code of Obligations No. 6098. According to this provision, individuals who are at risk of losing customers due to unfair competition, regardless of whether they are merchants or not, are entitled to compensation.

In legal doctrine, some scholars argue that the regulation of unfair competition in the TCO is unnecessary because the provisions in the TCC can be applied universally, regardless of whether the individuals involved are merchants or whether the unfair competition occurs in a commercial relationship (ÖZEL, Professor Dr. Çağlar; ÖZDEMİR, Dr. Semih Sırrı, "Regulations on Unfair Competition in Turkish Law," D.E.Ü Law Faculty Journal, Special Issue in Honor of Professor Dr. Şeref Ertaş, C.19, Special Issue 2017, p.195).

While the opposing view is minority, the majority in doctrine and in practice by the Court of Cassation accept the first view as legally sound. As understood from the phrase "in the interest of all participants" in Article 54 of the TCC, the scope of the unfair competition provisions in the TCC overlaps with those in Article 57 of the TCC.

CONSUMER PROTECTION LAW No. 6502

Another law in our legal system that addresses unfair competition is the Consumer Protection Law No. 6502. The regulation in Article 62 of this law, titled "Unfair Commercial Practices," aims to protect consumers in cases of unfair competition. With this regulation and through the references it makes, the unfair commercial practices outlined in the Regulation on Commercial Advertising and Unfair Commercial Practices No. 29232 are the consumer law equivalent of the unfair competition situations listed in Article 55 of the TCC. In other words, the unfair practices listed in Article 62 of the Consumer Protection Law are also considered unfair competition under the TCC. Indeed, in cases where these unfair practices occur, the claim for compensation is based on Article 56 of the TCC, not the Consumer Protection Law No. 6502. This is because the regulation in Article 62 only defines what constitutes unfair practices, but it does not provide for compensation; instead, it foresees administrative fines.

COMPETITION LAW No. 4054

Competition law and the concept of unfair competition are intertwined. The source of competition law is the Law No. 4054 on the Protection of Competition. As stated in the purpose article of this law, competition law aims to protect the structure of the free-market system and prevent practices that disrupt, block, or restrict this structure through state penalties, while unfair competition focuses on protecting the market at a micro level by limiting the actions of market actors. For example, defaming a competitor through advertisements or disclosing information about a competitor constitutes unfair competition, while actions such as market-sharing or mergers between dominant companies that aim to eliminate competitors from the market fall within the scope of competition law.

Competition law and unfair competition law both aim to ensure that competition develops in a fair, merit-based environment. Due to their shared goal, there are many areas where these two branches of law intersect; the boycott, which is the subject of our article, is one such area. Indeed, in Article 4/1-d of the Law No. 4054 on the Protection of Competition, which lists anti-competitive decisions and actions, the clause "… exclusion from the market through boycott or other actions" is also considered a violation of competition law. Therefore, it is accepted in doctrine that a boycott violates both competition law and unfair competition law. In other words, in cases of a boycott or other actions prohibited by competition law, the provisions of both the TCC and the Law on the Protection of Competition will apply cumulatively.

Additionally, the Industrial Property Law No. 6769, the Law No. 3577 on Preventing Unfair Competition in Imports, and international treaties contain many provisions regarding the institution of unfair competition. Below, we will address the elements of unfair competition under the Turkish Commercial Code No. 6102 and then examine situations of unfair competition due to boycott.

ELEMENTS OF UNFAIR COMPETITION UNDER THE TURKISH COMMERCIAL CODE

According to Article 48/1 of the Constitution, everyone has the freedom to work and enter into contracts. However, the working and contractual freedom guaranteed by the constitution does not give individuals the right to compete without limits. Actions and commercial practices that disrupt the competitive environment are countered by the norms of unfair competition law. The unfair competition institution, regulated between Articles 54 and 63 of the Turkish Commercial Code No. 6102, aims to create a reliable, uncorrupted, and sustainable competitive environment in service of Article 48 of the Constitution. The aim of unfair competition law is to protect not only individual efforts, accumulated knowledge, and investments but also the competitive environment itself. Therefore, unfair competition protects not the competitors in the market but the competition process itself. In other words, unfair competition can be raised against anyone, and its existence does not necessarily require a commercial relationship. Indeed, in a decision, the Court of Cassation upheld a compensation claim for unfair competition based on an article titled "Tea Sales and Record Loss to Be Celebrated in Kemer" published on the website "olay53.com."

Based on the explanations provided, we will now examine the fundamental elements of unfair competition, along with the relevant legal norms.

Deceptive or Unfair Behavior or Commercial Practices (TCC Article 54/2)

As previously explained, unfair competition is a reflection of tort law in commercial law. Therefore, to define unfair competition, there must first be an act. This act can take the form of either doing something or refraining from doing something. For example, a call for a boycott by a business against a competitor constitutes an act (active behavior), while failure to comply with mandatory regulations on sign sizes and colors specified by the relevant authorities constitutes a failure to act (passive behavior).

The term “commercial practice” mentioned in Article 54/2 of the Turkish Commercial Code (TCC) is defined in Article 62 of the Law on Consumer Protection No. 6502, titled "Unfair Commercial Practices." The terms "behavior" and "commercial practice" complement each other, and the legislator included both terms to emphasize that commercial practices lead to unfair competition.

The requirement that the behavior causing unfair competition be deceptive and contrary to the rule of honesty has been clarified in both Article 54 of the TCC and its rationale. At this point, one might wonder whether the concept of the rule of honesty in Article 54/2 of the TCC overlaps with the rule of honesty in Article 2 of the Turkish Civil Code (TCC). According to the rationale of Article 54/2, the rule of honesty in Article 2 of the TCC pertains to relationships based on contracts or similar mutual declarations of intent, with the aim of protecting trust between parties. In other words, the rule of honesty under the TCC focuses on trust relationships arising from mutual agreements or other harmonious declarations of intent. However, the concept of honest behavior in Article 54/2 of the TCC can be applied to disputes without requiring a relationship between the parties (BOZKURT, Tamer, Commercial Enterprise Law, 5th edition, 2023, p. 382).

Moreover, the concept of honest behavior in Article 54/2 of the TCC exceeds the scope of the rule of honesty in Article 2 of the TCC. This broader concept aims to fully protect the competitive environment, not just the contractual or pre-contractual trust relationships between individuals.

COMPETITION BEING NEGATIVELY AFFECTED

Another essential element for establishing unfair competition is that the competition must be negatively affected. An act that has no impact on the market cannot be considered as causing unfair competition. If the behavior negatively impacts competition in the economic or professional sphere of the victim, then unfair competition will be recognized. For example, consumer boycotts not aimed at obtaining benefits may have a positive effect on the market by encouraging producers and suppliers to act more cautiously, and in this case, there would be no unfair competition.

When assessing how behavior that violates the rule of honesty or is deceptive affects the market, only objective criteria should be taken into account. The objective criteria imply that it is irrelevant whether the behavior that constitutes unfair competition has caused damage to market participants or whether the business performing the act did so intentionally. Competitor companies may be forced to reduce production, halt operations, or incur significant costs to educate customers, even if they do not suffer direct damages. In such cases, unfair competition can still be recognized even if no tangible harm occurs to the competitor.

BOYCOTT IN UNFAIR COMPETITION LAW

Definition of Boycott

According to the Turkish Language Association, the term "boycott" means "to sever all relations with a person, group, or country in order to achieve a goal." Boycott in unfair competition law has multiple definitions, but the most appropriate definition is "the severance of existing business connections with an enterprise or refusal to enter into any future business relations with it." This definition encompasses both the termination of current business relationships with the boycotted entity and the avoidance of establishing new business relations in the future.

Parties Involved in a Boycott

A boycott is not an individual action but rather a multilateral unfair competition situation aimed at gathering support for the actions of the person initiating the boycott. Thus, there are three parties involved in a boycott: the one initiating the boycott, the participants in the boycott, and the entity being boycotted. A boycott that does not involve these three parties, even if initiated by a dominant entity in the market, will not lead to unfair competition unless there is a response to the call for a boycott. If the person calling for the boycott proceeds with the support of those agreeing to the boycott, the boycott constitutes an unfair competition act.

Honesty Rule in Boycott Cases

The conclusion that a boycott call is an act contrary to the rule of honesty is inherent in the purpose of the boycott. Instead of developing business policies that influence consumers' purchasing decisions, the initiator of the boycott aims to eliminate the competitor's market power and prevent the sale of their goods or services. However, not every action to reduce a competitor's sales constitutes unfair competition. Customers are not exclusive to any one company and can be persuaded by any company to increase its market share.

In a boycott, the call goes beyond merely encouraging others to take action; it involves directly managing the will of the participants, telling them what to do. When a boycott occurs, customers are deprived of the ability to compare competitors and make decisions, and the boycott initiator directly interferes with the competitor's ability to sell goods or services in a manner contrary to the rule of honesty.

Boycott’s Impact on the Market

The explanations above regarding the market being affected by unfair competition also apply to boycotts. When assessing whether a boycott constitutes unfair competition, the focus should be on objective criteria, irrespective of the purpose of the boycott or whether there is actual harm in the market. For example, if a boycott is called against a product like Danino, claiming that it contains a harmful substance, and as a result, the company experiences a significant decline in sales, it shows the negative impact of the boycott on the market.

Damage and Fault in Boycott Cases

As stated earlier, no requirement for damage or fault exists for unfair competition to be recognized. In fact, the legislator does not include damage or fault in the provisions of Article 54 of the TCC, which regulates unfair competition. Even if no actual damage occurs, the boycott may still be considered an unfair competition act, especially if it significantly impacts market activities.

CONCLUSION

In unfair competition law, a boycott is a three-party unfair competition act intertwined with the provisions of Articles 55/1-a and 55/1-b of the Turkish Commercial Code (TCC). A boycott initiated by one party, through defaming the goods or services of the other party or making misleading statements about the goods and services, constitutes an unfair competition act aimed at causing the boycotting party to sever its business relationship with the initiator of the boycott.

However, as explained in detail in this article, for a boycott to be classified as unfair competition, it is not necessary for the boycotted party to suffer damage or for the initiator of the boycott to act with intent. Even if no actual damage occurs, a boycott that affects the market will still constitute unfair competition. This is because the boycotted party may delay or completely stop offering goods or services to the market, anticipating that the demand in the market will significantly decrease due to the boycott call.

A boycott as an unfair competition act must exceed the level of simple encouragement for the purchase of the initiator's own goods or services. In other words, the party calling for the boycott must engage in actions that significantly influence customers' decision-making, thereby removing their freedom to make decisions between competitors. Otherwise, anyone can compete with rival companies and engage in encouraging actions to promote their goods or services, which would not constitute unfair competition.

There should be no contractual obligation between the party calling for the boycott and the participants in the boycott. If a boycott is carried out due to the dependency between the initiator of the boycott and the participants, the boycott would not be considered voluntary, and thus, it would not be classified as an unfair competition act. Finally, a boycott conducted by a customer, who independently decides to act due to personal needs, without participating in a collective boycott, would fall outside the scope of unfair competition law.

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